‘India will be beneficiary of China plus one strategy’September 5, 2023
‘Our factories are world-class and are becoming increasingly attractive for our global business leaders to use to serve other markets.’
ABB India is optimistic about domestic demand outstripping export growth, with strong momentum in private and public spending.
Sanjeev Sharma, country head and managing director, speaks to Amritha Pillay/Business Standard on growth from smaller cities, newer segments, and opportunities from the China plus one strategy.
The June quarter this year has been a robust one for the firm and the sector. What are the main segments driving this growth?
Segments like food and beverages, joined by some traditional areas like metals and cement, have seen good growth.
All divisions and market segments are doing well and we have not seen any slowdown in any segment in a significant way.
In that growth, can you give us a division of the public sector- and private sector-led capex cycle?
We are seeing growth on both sides. For example, there are railways, metros, and city power distribution, which are largely in the public sector, and on the private sector side, there are beverages, pharmaceuticals, metals, and cement.
We see resilient demand there as well.
With the upcoming general elections, is there a worry the growth momentum will slow?
That doesn’t really concern us. We are very long on India. We see no impact due to elections.
There’s pretty strong government spending both at the state and central levels and also private players have a lot of confidence in expanding their capacities.
Any other challenges you see that could derail this growth?
We don’t have reasons to believe that right now … but we do expect one segment or the other to saturate after a certain level of investment.
We are looking at new market segments like green hydrogen and electric vehicles.
Throw some light on the business growth you are witnessing in smaller cities.
Tier-II and III cities have seen a lot of expansion in businesses, whether it’s integrators or machine manufacturers.
The availability of talent and land cost makes it attractive for businesses and we are seeing good growth.
A good percentage of our growth comes from these cities.
Your plans for organic and inorganic growth?
As our capacity utilisation reaches a good level, and the number of shifts reaches saturation, we start expanding.
We will continue with the Rs 200-250 crore capex run rate annually.
For inorganic growth, each of our division leaders has the mandate to scout for opportunities globally and locally.
In your investor call you have spoken of increasing orders from the global company. Are you expecting a rise in the contribution from exports?
Our factories are world-class and are becoming increasingly attractive for our global business leaders to use to serve other markets.
As a percentage, exports will stay at 10-15 per cent (of sales) for the simple reason that even if exports grow in real terms, growth in the Indian market will continue to overshadow that.
Domestic growth is stronger than the export market.
Are Indian makers of capital goods witnessing any traction owing to the China plus one strategy?
China has created a lot of capacity and good competence.
There will not be any letup there (companies which have already invested there) in the near term.
But as regards any future expansion — and I believe that’s where the China plus one strategy is talked about — we see India will be a beneficiary.
Feature Presentation: Aslam Hunani/Rediff.com
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